Varroc Engineering , a leading auto components manufacturer, has reported a 6.1% year-on-year growth in consolidated revenue, reaching INR 22.7 billion in Q2 FY26. The company demonstrated resilience in the face of rare-earth magnet supply issues, which cost an estimated INR 750 million in potential revenue.

Financial Highlights

Debt Reduction and Order Book

Varroc Engineering has made significant strides in strengthening its financial position:

• Net debt reduced by INR 3,680 million in H1 FY26
• Net debt to equity ratio improved to below 0.22x
• Secured new business wins worth INR 8,928 million in annualized peak revenue
• 63% of new orders from EV customers

Operational Insights

The company's performance was impacted by rare-earth magnet supply issues, primarily affecting its powertrain product line, especially traction motors. However, Varroc has successfully derisked its supply chain, with normalization achieved towards the end of Q2.

Tarang Jain, Chairman and Managing Director, commented, "We are moving fast to make our organization more agile, fundamentally strong and customer focused to succeed in this environment. Over the last 3 years, since the divestment exercise, we have been consistently improving on financial prudence, cost reduction and customer delight."

Future Outlook

Varroc Engineering is focusing on three key growth pillars:

1. Content increases driven by safer, smarter, sustainable, and more premium mobility
2. Portfolio management, including a new manufacturing facility in Thailand
3. Expansion into adjacencies, including aftermarket and exports

The company expects to double its revenue by 2030 and aims to achieve a PBT margin well above 10%.

EV and Technology Focus

Varroc's revenue from EV customers now stands at 11% of total revenue. The company has a strong product portfolio across different powertrains, with 5-7 times more content in electric vehicles compared to ICE vehicles.

Arjun Jain, Whole-Time Director and CEO of Business Unit-I, stated, "We have strong technology. We have strong positioning across all powertrains. And we now wait to see how the market evolves, and we are in the right place to take advantage regardless of which direction the market moves in."

As Varroc Engineering continues to navigate the evolving automotive landscape, its focus on debt reduction, technological advancements, and strategic growth initiatives positions the company well for future success in the auto components sector.

Varroc Engineering Limited , a global tier-1 automotive component group, has announced its unaudited financial results for the second quarter and half-year ended September 30, 2025, showcasing robust growth and operational improvements.

Financial Highlights

For Q2 FY26, Varroc Engineering reported:

• Consolidated revenue from operations of Rs. 22,073.00 million, a 6.1% increase year-over-year (YoY)
• EBITDA of Rs. 2,018.00 million, with an EBITDA margin of 9.1%
• Profit Before Tax (PBT) before JV and exceptional items of Rs. 912.00 million
• Profit After Tax (PAT) of Rs. 633.00 million

The company's performance for H1 FY26 was equally impressive:

• Consolidated revenue from operations reached Rs. 42,349.00 million, up 6.4% YoY
• EBITDA stood at Rs. 3,937.00 million, with a margin of 9.3%
• PBT before JV and exceptional items was Rs. 1,696.00 million
• PAT increased to Rs. 1,707.00 million

Operational Performance

Varroc's Indian operations grew by 7.9% YoY, despite facing challenges from an industry-wide rare-earth issue. The company estimates that this issue resulted in a revenue loss of approximately Rs. 750.00 million in Q2 FY26. Without this impact, the growth in Indian operations would have been 11.8%.

The company's overseas business, comprising 2W lighting, advanced electronics, and forging operations, faced some challenges. However, Varroc has been winning significant orders for its overseas electronics and lighting businesses, with a turnaround expected to be visible from H2 of FY27.

Balance Sheet Strengthening

Varroc continues to strengthen its balance sheet. In H1 FY26, the company reduced its net debt by Rs. 3,680.00 million, bringing the net debt to equity ratio below 0.22x. The absolute net debt figure stood at Rs. 3,800.00 million as of September 30, 2025.

New Business Wins

In H1 FY26, Varroc achieved net new business wins with annualized peak revenues of Rs. 8,928.00 million. Notable wins include 4W lighting business for passenger vehicles and increased volume from an existing EV customer.

Management Commentary

Mr. Tarang Jain, CMD of Varroc Engineering, commented on the results: "The Indian economy continues to perform well, experiencing robust growth and has become the world's fastest-growing major economy. In these uncertain times, it becomes very important for the Company to find ways to manage this uncertainty and grow simultaneously during this period. We are moving fast to make our organisation more agile, fundamentally strong, and customer-focused to succeed in this environment."

He further added, "Over the last 3 years since the divestment exercise, we have been consistently improving on financial prudence, cost reduction and customer delight. As a result, the Net Debt/EBITDA, which was more than 2x in FY23, is now below 0.3X. The interest burden which was close to 3% of revenue in Q2 of FY23 has been reduced to below 1.5% in Q2 of FY26."

Future Outlook

Varroc's growth plan is built on three pillars:

1. Focusing on E-mobility, connectivity, and ADAS to capitalize on the CASE (Connected, Autonomous, Shared, and Electric) disruption in the automotive sector.
2. Strategic business portfolio management, including setting up operations in Thailand to take advantage of export opportunities.
3. Exploring growth in aftermarket, exports, and non-auto sectors through organic and inorganic means.

The company remains confident in its ability to win high-voltage electronics contracts for a range of high-performance e-powertrain components for its Romanian business before the end of the current calendar year.

With these strategic initiatives and a focus on financial prudence, Varroc Engineering is well-positioned to navigate the evolving automotive landscape and deliver sustainable growth in the coming quarters.